Gaining fluency in finance: globalisation/financialisation and offshore financial centres

Abstract

Consultancy discourse in the area of creating and destroying value for shareholders is held together by a shared framework which sees SV as a legitimate objective. However, consultancy discourse in the area of tax neutrality or minimisation, fund management and private banking is often subordinated by portrayals of OFCs, particularly of the Caribbean and Pacific as vulnerable to ‘harmful' tax practices and money laundering. Whereas scrutiny attends the activities and the counsel girding the OFC operation, trust and faith abounds in financial specialists' judgement in their criteria of value and calculating uncertain futures. This apparent contradiction is overlooked primarily because of the ways OFCs are represented through language and discourse, and how knowledge has been constructed to provide understanding of the financialisation phenomenon. This essay attempts to bring these strands together in a narrative that treats the vagaries of international finance and the impulse to re-regulation of financial centres as part of a wider crisis in scientific finance as a knowledge field. Certainly capital account liberalisation and re-regulation of OFCs are not politically neutral objectives.

Keywords:

• financialisation
• offshore financial centres
• shareholder value
• merchant capital
• new international financial architecture

Notes

This is at least up to the recent collapse of the US mortgage market and its contagion effect. To be sure, the East Asian financial meltdown of a decade ago did feature some questions about the scientific authority of finance specialists, but much less so in the public domain as with the current squeeze on credit. See J. Sachs (1997) ‘Lessons from the Thais' and D. Felix (2003) ‘The Economic Case against Free Capital Mobility'.

I refer to The Gordon Report: Tax Havens and Their Use by United States Taxpayers – An Overview, (1981); Crime and Secrecy: The Use of Offshore Banks and Companies prepared by the US Senate's Committee on Governmental Affairs in 1983; and the 1984 study, Tax Havens in the Caribbean Basin, prepared by the US Department of Treasury.

For discussion on regulation and questions over the legitimacy of global financial regimes, see A. Claire Cutler, V. Haufler and T. Porter (eds.) (1999) Private Authority in International Affairs, the Special Issue of Global Governance, 7, No.4, focusing on the NIFA, and, in particular, R.D. Germain's essay ‘Global Financial Governance and the Problem of Inclusion'.

This data was drawn from Hejazi's study. It corresponds with private interviews (April 22 2008) I conducted with officials at the Barbados Industrial Development Corporation. One officer pointed to the registration of international business companies and reinsurance business emanating from Canada and referred to the country as its single most source of international business.

In this environment, it is the financial world of hedge funds, investment banks, ratings agencies and private equity concerns that pre-dominates with ‘risk-management' the new mantra (see Blackburn 2006; Beck 2002).

As occurred in the Dubai index, Paris Bourse, London's FTSE, Tokyo's Nikkei Index, the Sydney Futures Exchange and New York's Dow Jones Index. For more on this see, the story produced by the Associated Free Press and published in the Sydney Morning Herald 20 August 2007 ‘Markets Brace for a Volatile Week'. Also see, Jason Martin 31 July 2007 ‘American Home Mortgage Implodes'.

By offshore economy, Palan includes finance, manufacturing, online casino gambling, call centres, and outsourcing to niche industries and activities.

For more on merchant capital's tendency, see G. Kay (1975) Development and Underdevelopment. The triangular trade refers to the trade in bodies, goods and credit across the Atlantic and the Americas, featuring mainly, England, West Africa, the Caribbean and the colonial America.

Short-selling is the practice of ‘selling a borrowed security'. Short-sellers sell a security or commodity that they do not own for delivery at a later date, thus profiting from price declines. See Karpoff (1994) ‘Short selling' p. 445.

I refer to the European tradition of landscape painting and classical allegory as well. The Caribbean has been portrayed in various texts as Edens and Utopias. By the late 19th century its hinterland was represented as either the site of Paradise lost or the location of piratical adventure as in Daniel Defoe's Robinson Crusoe. It is also the site imagined for the enactment of the master-slave dialectic as in William Shakespeare's, The Tempest.

Briefly, the Sugar Duties Act (1846) imposed higher import duties on sugar exported from the West Indies into Britain. Already beleaguered by the loss of their traditional (slave) labour supply and the price-fall of sugar, many Jamaican and Guyanese plantations soon went into bankruptcy. For more on this, see Williams, E., 1970. From Columbus to Castro: The History of the Caribbean, 1492–1969.

See Corfield, G. S., 1938. ‘Sponge Industry of the Caribbean Area'.

For legislation created to stimulate offshore and non-resident business see those of Barbados: the International Business Company (IBC) Act of 1965, forerunner to the 1991 International Business Act, the Exempt Insurance Act of 1983, the Offshore Banking Act of 1984 which has been replaced by the 2002 International Financial Services Act, and the 2001 Electronic Transactions Act. For Acts passed see: http://www.lawandtax‐news.com/html/bermuda/jbrlatolaw.html [Accessed 27 September 2007].

Agreement Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland, including the Government of Cayman Islands, for the Exchange of Information Related to Taxes, Nov. 27 2001, U.S.-Cayman Islands., Worldwide Tax Treaties Doc. 2001-29858, art. 2. http://www.taxanalysts.com [Accessed 27 September 2007].

See The Wooding Commission. 1968. Bermuda Civil Disorders 1968, Report of Commission and Statement by the Government of Bermuda, Hamilton. p.80.

Indeed Bermuda's ship registry extended further back to the early 1700s. As part of the British registry, Bermuda-registered ships flew the red ensign under faced and were therefore entitled to the protection of the British Royal Navy.

This was carried out by KPMG to assess the extent to which Overseas Territories comply with international standards and good practice. See http://www.cimoney.com.ky [Accessed 28 September 2007].

See Business Wire (2006) Communications Service Provider Establishes Presence in Bermuda.

HedgeWorld.com, which is based in Bermuda and which launched in September of 1999, claims to have been the first e-commerce-enabled Web site serving the needs of the hedge fund and global alternative investment industry.

The three license banks that appear on the Bermuda Stock exchange are: The Bank of Bermuda Limited, the Bank of N.T. Butterfield & Son Limited, and the Bermuda Commercial Bank Limited. The former two, and larger banks, have each been in existence for over 100 years. As at 31 December 1994, the consolidated assets of the three banks were some $12.4 billion, while the assets under their administration were valued at several times that amount. See http://www.offshore‐manual.com/taxhavens/Bermuda.html [Accessed 29 September 2007].